BAT NZ annual profit biggest since at least 1999

British American Tobacco NZ posts biggest annual profit
in at least 14 years

By Suze Metherell

June 6
(BusinessDesk) - British American Tobacco Holdings (New
Zealand), the nation's largest cigarette company, reported
its biggest annual profit since at least 1999, after
earnings rose 15 percent as it cut costs while increased
excise tax hiked prices.

The local arm of British American
Tobacco, whose brands include Pall Mall, Benson & Hedges and
Dunhill, lifted profit to $132 million in calendar 2013 from
$115 million a year earlier, according to financial
statements lodged with the Companies Office. That's the
biggest annual profit the New Zealand unit has reported
according to financial statements dating back to 1999. BAT
NZ paid and declared dividends of $122 million in 2013, down
from $139.2 million in 2012. BAT NZ declined to confirm
whether the profit was a record.

The company's revenue,
which includes excise duties, rose 3.6 percent to $1.21
billion, while administrative and other overheads and
selling, distribution and marketing costs shrank 17 percent
to $60.8 million. The cost of sales, which includes excise
tax, rose 3.6 percent to $963.5 million. BAT NZ spent $46.7
million buying finished goods from related parties in the
year, while its inventories shrank to $329.1 million as at
Dec. 31 from $344.8 million a year earlier.

New Zealand
"market share was higher, however, volume was impacted by
the industry contraction. Profit grew strongly due to price
increases and cost savings," the London-based parent said in
its 2013 annual report. The parent reported a 2.7 percent
decline in volume to 676 billion cigarettes in the year
ended Dec. 31, while global sales were flat at 15.3 billion
pounds. BAT group profit rose 3 percent to 5.55 billion
pounds in 2013. Its Asia-Pacific unit made up 27 percent of
revenue with 4.2 billion pounds in sales, delivering a
profit of 1.7 billion pounds.

BAT dominates the local
market, with its nearest rival, Imperial Tobacco, reporting
sales of $432 million in the year ended Sept. 30, 2013 and
third-ranked Phillip Morris posting sales of $83 million in
calendar 2013.

The New Zealand government has been
increasing the tobacco excise by 10 percent each year since
2012, lifting the price consumers must pay as part of a
policy to make New Zealand smoke-free by 2025. The increases
are expected to lift the average price of a pack of 20
cigarettes to more than $20 by 2016.

"Tobacco consumption
in New Zealand has been declining for many years,
principally in response to gradual excise increases," Dawn
O'Connor, BAT NZ spokeswoman told BusinessDesk. "There have
been significant excise increases imposed since 2010 and we
think that existing measures should be given time to have an
impact before new measures are considered."

New Zealand is
looking to follow Australia in introducing plain packaging
in a bid to reduce brand recognition and shrink the
cigarette market. Australia has introduced non-identifiable
tobacco products but is being sued by tobacco producers at
the World Trade Organisation which say the new regulations
are intellectual property infringement.

Tobacco companies
have been vigorously opposed to the plain packaging
movement, questioning the legality and effectiveness of
removing the last mode of advertisement for their brands and
arguing it has led to an increase in black market
tobacco.

Last month, New Zealand's government cut duty
free allowances on tobacco to 50 cigarettes per person, from
200 cigarettes. Duty free sales make up 2 percent of the
local British American Tobacco sales, O'Connor said.

As
more governments clamp down on smoking and the market
reaches maturity, tobacco companies are looking for
alternative, such as the e-cigarette. Nicotine e-cigarettes
are illegal in New Zealand, something which the company is
lobbying the government to
change.

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

CONTACT BUSINESSDESK

Rocket Lab has signed a Commercial Space Launch Act Agreement with the National Aeronautics and Space Administration (NASA). The agreement enables Rocket Lab to use NASA resources - including personnel, facilities and equipment - for launch and reentry efforts. More>>

ALSO:

Reserve Bank governor Graeme Wheeler says some market commentators are predicting further declines in interest rates that would only make sense for an economy in recession, although some easing is likely to be needed to maintain New Zealand’s economic growth. More>>

Legal advice sought by the Hawke’s Bay Regional Council on the Ruataniwha Dam consent conditions has confirmed that farmers who sign up to take water from the dam could be required to reduce the intensity of their farming operation to meet the catchment’s strict nitrogen limit. More>>

Health and safety law reform sparked by the Pike River coalmine disaster has been reported back from the industrial relations select committee with weakened requirements on small businesses to appoint health and safety representatives and committees. More>>

The value of fruit exported rose 20 percent (up $330 million) for the June 2015 year when compared with the year ended June 2014. Both higher prices and a greater quantity of exports (up 9.0 percent) contributed to the overall rise. More>>